Banks blocked entry to €10trn derivatives market, says inquiry

“Thirteen big banks colluded to shut out competition from the multi-trillion euro derivatives market, according to an investigation by the European Commission”, reveals the EUobserver, outlining the conclusions of a large scale probe into bank practices.

The report says that banks including Barclays, BNP Paribas, Deutsche Bank and the Royal Bank of Scotland, who controlled industry organisations responsible for issuing licences, such as the International Swaps and Derivatives Association, colluded to avoid granting trading permits to rivals. These would have allowed competitors to take part in the €10 trn trade in credit default swaps (CDS), a type of insurance product designed to protect institutions against debt defaults. The news websites continues –

The banks allegedly coordinated their behaviour to jointly prevent the Deutsche Börse stock market and the Chicago Mercantile Exchange from being issued licenses allowing them to enter the CDS market. The two exchanges were allegedly shut out of the market between 2006 and 2009, covering the end of the credit boom and the financial crisis in 2008-9.

Quoting a statement made by Joaquin Almunia, European Commission vice president responsible for Competition Policy, the banks "delayed the emergence of exchange trading of these financial products because they feared that it would reduce their revenues."

If the investigation conclusions are confirmed and the banks are found to have breached anti-trust regulations, the Commission can impose fines of up to 10 per cent of a firm’s annual turnover.